Bitcoin Dips to $109K Amid Inflation Data, $970M Liquidated

The Bureau of Labor Statistics’ August report showed inflation increased 2.7% year-over-year, slightly hotter than July’s 2.6% reading, but it was the core consumer spending figure—excluding volatile food and energy prices—that caught investors’ attention with a 2.9% annual increase. This data point is particularly significant for Bitcoin investors as it serves as the primary inflation gauge for the Federal Open Markets Committee (FOMC). Fabian Dori, chief investment officer at Sygnum Bank, explained to Decrypt that while the numbers “reinforce the Fed’s narrative of gradually easing price pressures, it still leaves policymakers balancing sticky inflation with signs of a softer labor market.”

The implications for risk assets like Bitcoin are twofold, according to Dori. “If inflation trends lower, risk assets may find support from confidence in the Fed’s easing cycle; but any upside surprises in coming data could push back short-term rate cut expectations, weighing on equities and boosting the dollar.” This delicate balance has created uncertainty around the Fed’s next move, with the CME FedWatch Tool showing traders now assign an 87.7% probability of a 25-basis point rate cut at the October meeting, down slightly from 91.9% last week.

Bitcoin’s sensitivity to these macroeconomic shifts was evident as it dipped to $109,000 before a slight rebound to $109,300 early Friday. According to CoinGecko data, BTC has fallen 5.9% over the past week, reflecting broader market jitters about monetary policy direction. The cryptocurrency’s performance highlights its evolving role as a barometer for risk appetite in an environment where traditional indicators are sending mixed signals.

The price volatility triggered one of the most significant liquidation events in recent weeks, with $970 million worth of crypto futures contracts forced to close within 24 hours. The pain was particularly acute for bullish traders, with $852 million of the liquidations coming from long positions betting on price increases. The scale of the long liquidation suggests many traders were caught off guard by the market’s reaction to the inflation data and subsequent tariff announcements.

According to CoinGlass data, the largest single liquidated position was a $19.2 million ETH-USDT contract on Singapore-based exchange HTX, underscoring how the selling pressure extended beyond Bitcoin to the broader cryptocurrency market. This liquidation wave has dramatically shifted market psychology, with prediction market Myriad—owned by Decrypt parent company DASTAN—showing 69% of users now expecting Bitcoin to fall to $105,000 before it can break out to $125,000. Just two days earlier, bears and bulls had been evenly matched, indicating how quickly sentiment can turn in volatile crypto markets.

Dean Chen, an analyst for crypto derivatives exchange Bitunix, noted that while inflation coming in at forecasted levels helped keep initial market reactions muted, “the recently announced high tariffs remain an uncertain factor that could deliver one-off inflationary pressure while weighing on growth.” He added that “overall, capital flows remain cautious, with risk assets under pressure and inflation-hedging sentiment persisting,” creating a challenging environment for cryptocurrency valuations.

Compounding the inflation concerns, former President Donald Trump’s announcement of new tariffs scheduled to take effect October 1 introduced another layer of uncertainty. The policy, revealed late Thursday on Truth Social—majority-owned by the Donald J. Trump Revocable Trust—includes a 100% duty on branded drugs, 25% on heavy-duty trucks, 50% on kitchen cabinets and bathroom vanities, and 30% on upholstered furniture. These measures could create secondary inflationary effects that complicate the Federal Reserve’s policy decisions.

Trump has also used the platform to criticize Federal Reserve Chair Jerome Powell, writing: “If it weren’t for Jerome ‘Too Late’ Powell, we would be at 2% right now, and in the process of balancing our budget. The good news is that we’re powering through his incompetence.” This public tension between political leadership and central bank independence adds to the uncertainty that markets typically dislike, particularly for emerging asset classes like cryptocurrency.

Interestingly, Powell himself sounded less alarmed about tariffs during a speech at the Greater Providence Chamber of Commerce in Rhode Island, suggesting that “the overall economic effects of the significant changes in trade, immigration, fiscal and regulatory policy remain to be seen. A reasonable base case is that the tariff-related effects on inflation will be relatively short lived—a one-time shift in the price level.” This divergence in perspective between political leadership and monetary authorities creates a complex backdrop for Bitcoin traders navigating multiple sources of uncertainty.

Amid the macroeconomic crosscurrents, technical levels have become crucial for Bitcoin traders. Bitunix’s Dean Chen advised that “traders should keep leverage strictly controlled, scale into positions gradually, and validate breakouts/fake-outs through capital flows.” He identified $108,000 as critical support and $111,000 as the near-term resistance zone for BTC, levels that will likely determine whether the current correction deepens or stabilizes.

The cautious approach recommended by analysts reflects the challenging environment where traditional catalysts like inflation data are interacting with unconventional factors like tariff policies and public disputes between political figures and central bankers. Chen emphasized that the tariffs “will be a key concern for Bitcoin traders” in the coming weeks, suggesting that political developments may carry as much weight as economic data in the current market cycle.

As Bitcoin continues to mature as an asset class, its sensitivity to both traditional financial indicators and unconventional political developments highlights its unique position at the intersection of multiple markets. The coming weeks will test whether it can maintain key support levels amid competing inflationary pressures from both economic data and trade policy, providing crucial insight into its resilience as a risk asset in an increasingly complex macroeconomic landscape.